SPEAKER_05 0:11

Hello everybody.

SPEAKER_00 0:17

Does it remind everybody hit the on button? It turns everybody's cameras and mics back on. So please pop them back on so I can see who's here. Hello, Rory, Clayton. I see a couple of y'all joining right now. Taryn, hello. Hi, Michael. And we've got Mabel and Scum as well. Thank y'all for joining today. Great to have you guys. I know it's a couple of them's very first time on the Z call after we haven't had one last week with Thanksgiving. So I'm glad to see everybody this week. And just as a reminder on these calls, what how we will do this is Sam will kick us a month and give us a little introduction on himself and his market and all things that he wants to talk to us about today. And then you guys please feel free to come up the your mic and ask all of your questions. So with all that being said, Sam, go ahead and kick us off with your introduction.

SPEAKER_01 1:26

Thank you, Savannah. Um I'm Sam Kavachi. Uh I'm one of the owners from Citywide of Cleveland. Uh we're celebrating our 20th year in the system, and I'm just in my 17th year. I'm going to be turning 18 next year. Um, so it's been it's been quite a journey to watch. I think we were the sixth city to uh sign on. Um it's really grown over the years, and the system's really grown with it. So a little bit of background about me. Um, my dad started it uh 20 years ago. I came into it. Uh, I was just out of college. I tried doing something else in the hospitality business, and I just kind of saw the writing on the wall for once you get to a certain age, people kind of start pushing people out, and I was gonna get there eventually. So I wanted to go into business with my dad. Uh, it's my two sisters and myself. And uh we've had a great time doing it over the past uh 20 years. So um some things that uh we've currently got 28 employees here. Uh there were two when I started. So uh it's grown quite a bit. Uh we're gonna be doing about 17 million dollars in business this year. And um, you know, some things that attracted us to the uh citywide model was A, you know, you got the recurring revenue, and B, it's kind of a recession-proof business that you can just kind of keep keep building off of. I've been through a pandemic and a financial crisis, and we're still here and we're still growing uh really pretty well. So it's been um quite a journey, ups and downs, but a lot more ups than downs. Um let's see what else. Um the other the other thing that attracted to us was when we were looking for other businesses, was um it doesn't have the overhead that other city uh other franchises are franchises do. Uh that was really appealing. And then we get to work with independent contractors, which you know might not sound like a blessing, but it really is at the end of the day. Uh the people we get to work with uh are really incredible, talented, and it's it's been it's really been a blessing to us.

SPEAKER_00 3:47

That's awesome, Sam. Thank you so much. Um, I'm gonna kick it off with the first question, which might be a little bit of a leading question, but I because I do know that your tenure of a couple of your staff, but as an individual that has some sales executives that have been around for a long time, can you talk to us a little bit about what you have done to help them grow in their career? What has helped them stick around? What have their sales goals been like? Um, just to give everybody a little idea of what that looks like.

SPEAKER_01 4:18

Well, you'll see this across the system. Um, you'll continue to see the same people year in and year out keep returning, especially to the high achievers. And it's not really a secret why, um, because there is a ton of upside financially uh for salespeople to make a lot of money here. And it's something that I don't think a lot of businesses can offer. So we offer paths, you know, people I was just telling Savannah earlier, we had somebody start off as pretty much just working the phones as an appointment setter. They've grown into be our number one salesperson uh now. And I mean, it's taken three, four years, uh, but you know, they started off just at the low, low end of the totem pole, and now they've worked themselves up and they're making over six figures this year, and they're gonna keep on doing it. And they're like I said, the the guy that came in here four years ago is not the same guy that's here now. He's really grown as a person, uh as an employee, and he's he's phenomenal. So I think just seeing a path forward for people that they uh if their goal is to make a lot of money, they can do that if they want to grow in different positions. Uh, we're always looking to upgrade our people and always look to promote from within. And there's always, you know, as we grow, we're always looking for people to grow with us.

SPEAKER_05 5:37

Awesome. Thank you so much. You guys can oh, perfect. Go ahead.

SPEAKER_04 5:46

Um, just um you you touched upon some of the things that you attracted you to the business was one is the low overhead and the independent contractor blessing. Can you expand it a little bit more when you compare it to other franchises? What were the low overheads and why the independent contractor is a blessing?

SPEAKER_01 6:09

So the low overhead, so my just even more background about my family. We started in the auto parts business, you know, a hundred years ago, and that was where you just were selling auto parts and you know, uh you had to have huge warehouses filled with inventory. You had to manage that, you had to sell it, and then you were always trying to beat people up on the, you know, the bottom dollar. Uh, with this, you know, we're selling a service, we're selling ourselves uh as a solution provider. And uh so we don't have to keep there's very little inventory we have to keep track of. We're not uh we're like I said, we're selling a service and it's very much in demand, and the business overall is very mediocre. Uh so really, if you just do what you say you're gonna do, nine times out of ten, the customer is gonna be happy with just that, just the bare minimum. Um, the other thing was, you know, and I I think it's one of those things you don't really get to appreciate until you're into the business, but I could not imagine running this business how the Otos did for so long before they came on the independent contractor model of just hiring people directly to do the work directly. Um I mean, at that point, you're like a staffing agency. All you're doing is trying to find people to fill spots day in and day out. And with us, you know, we have people that are business owners. So we're talking to them as business owners. So they want to grow their business. So whenever I bring a complaint to them, instead of, you know, being attacked or not taking the criticism well, they're looking to grow their business and they're looking for us to help them do that. And the people that the kind of caliber people that we attract is so much better than somebody if we're going to pay them 10, 12, 15 bucks an hour. Um, they're just a higher echelon people. So most of the time, you know, when we're going into buildings, um, the people look put together. They don't look like uh they are lower end of the wage scale people, they look professional, courteous, and it's just a a much different presentation from how the industry operates overall, which is pretty much either a mom and pop business or the franchise, the other franchise model, which just you know preys on people.

SPEAKER_04 8:20

Extremely helpful. Thank you so much. Uh uh just a follow-up question. Uh Sam, you mentioned um, I think like you have now 40 people, uh, but over a period of 17 years. Can you uh share a little bit more of when you started, how many people you had, and how how did the business from a from a people uh or the equipment perspective grew?

SPEAKER_01 8:42

Yeah, we've got about 28 people now. And so um the way we started off was, and I, you know, it it's citywide's grown a lot, and they're they've got a lot, uh, they've got really good guidance as far as you know how to staff it and when. Um, but uh, you know, started off with you know just a salesperson, and then you get uh we call them BDSs, but they're appointment setters, and then once you get to enough people, then you can bring on a night manager and then an account manager, and then as long as they are doing what they're supposed to be doing, then the salespeople can continue to get um more and more um accounts for the account manager to manage, and then uh it pretty much keeps on the as long as you're going and doing the model correctly, following the model, you'll continue to just keep growing your base of customers. Um, you know, if we're gonna speak in generalities, you'll lose probably, you know, 10% of customers a year. But you know, if your uh salespeople are doing what they're supposed to be doing and your uh account managers are doing theirs, it'll kind of grow like wildfire. And the more salespeople you have up front, the more the busier you get right away.

SPEAKER_05 10:05

I can ask the next question if that's all right. Please.

SPEAKER_02 10:09

Okay. Uh hey everybody, my name is Clayton Young. First call. Thanks for having me. I appreciate it. So uh love that we're on the concept of uh subcontractors or independent contractors, and I wanted to ask you, Samuel, about relationship management with them. So I like your points about how they are business owners themselves. They're looking to establish their brand and and to grow it. But how do you over time uh make the decision to keep a subcontractor or move on to another option?

SPEAKER_01 10:40

So uh it's one of those things the people you we first initially worked with, you know, are a different caliber of people that we work with now. And that's nothing more than, you know, working with people, trying them out. And then eventually you'll uh you'll get some contractors that are just naturally more a fit for the program. You know, for what we offer, we offer professional sales organization, we offer professional management, and they really just have to focus on why they got in the business in the first place. Um, it's a great deal for them. Some of some contractors get it more than others, and some people don't. So it's one of those things, as long as you're continually working on the relationship and it's a two, it's, you know, like anything else, it's a two-way street. Uh, I'll just say that some contractors are more open to the concept than others. And um eventually you will outgrow one another once you get to a certain point. And uh, I guess that would be to answer your second point. When do you know to cut ties? You'll just start working, you'll just say, you know, you started off with Brad for years, and Brad was a great guy, but now you work with Greg, and Greg's he always takes care of problems right away. He always gets back to you in like 15 minutes of a phone call, whereas you know, Brad might take two hours or all day to get back to you. You just start getting to you start upgrading your contractors, and then you're able to offer better service because you're able to work with them and communicate with them, and then they're able to be coached a lot better um with things that you know either go wrong or that need to be done.

SPEAKER_05 12:13

Yeah, thank you. I have a lot of questions, but if somebody else has a question, please go ahead.

SPEAKER_03 12:26

Um Sam, I um I wanted to kind of uh you know follow on on the contractor's question. Yeah like are there any services that are like notoriously hard to staff? Like um, you know, apart from janitorial.

SPEAKER_01 12:45

Um no, I mean I guess it's all about how you would, you know, um recruit and how you sell yourselves or how you convey what contractors are getting for when they are because most of them, you know, they're just used to dealing with the client directly or they're used to just doing things all themselves. They don't kind of understand what citywide is. They may, you know, might they think we're either just you know uh a talent agency or you know, uh just plug and play. But if they genuinely get the concept of, you know, let us manage this for you, let us sell this for you, let us take care of this for you, so that you can just focus on the work. You know, uh you'll just find uh painters, you'll uh painters are, you know, they're always looking for more work. Uh if you talk to any contractor, regardless of business, pressure washing, landscaping, snow plowing, I mean, they're always looking for more work. And part of you know, your job is the business owner or the you know, account manager, whatever it might be, is to just make sure that uh they can do what they say they're gonna do, and then you they're able to be managed and coached properly, um whatever the case may be.

SPEAKER_03 13:54

Ivan another one maybe related to sales. Um what is your lead mix? Do you do you still use the BD, the corporate uh BD BT business development team leads? Uh what is the mix between uh them, your own owner-generated uh leads versus um yeah, between the two.

SPEAKER_01 14:18

What is your lead mix? Um we've never used the um support centers call center. Um that was just a personal preference. I know a lot of cities do. Um we have uh sales executives, uh, and we in the past we've had uh sales associates and uh in-house B um appointment centers, BDS as we call them. Uh they are typically our best way of determining what we've found is qualified and unqualified leads. You know, we have we hire salespeople to work and develop a territory. And uh for us, it's just easier if the sales if we hire the right salespeople that are willing to do the uh groundwork of developing the territory, doing the cold calls, doing the drops, emails, getting the program together, and then we have a sales director over them to kind of keep them on task, but they naturally develop their own territory so they're able to kind of forge their own relationships. Um you know, we we've had uh two appointment setters or BDSs in the past, and um, you know, sometimes they're just they're uh our struggle was they were willing to take or take any appointment that whether it was qualified or not. Um we we like to go on people qualified appointments, and if anyone does sampler, people who are in pain, people who have a genuine interest that they have a problem, they want to be helped. And we had a hard time internally getting BDSs to just try to ask the right questions and make sure it was the right time for us to go in there and give them a building survey, give them a proposal, seeing if there was a genuine interest. Uh, that's not to say we don't go on appointments that, you know, if there isn't, you know, if if somebody's in the top 100 of something and they're inviting us in, we'll certainly go on the appointment. It might not necessarily lead to a um a sales call, so to speak. It'll be more of a meet and greet or a lunch and learn, something like that. Uh, but it's all about kind of planting a whole bunch of seeds all over and then eventually cultivating it when the time when the time's right.

SPEAKER_05 16:28

Awesome. Thank you. Sure.

SPEAKER_04 16:33

Sam, can you talk about your financial trajectory? How did the revenue grew year over year, and how long it took you to be cash flow positive? I know I know I'm asking you to go 17 years back, maybe.

SPEAKER_01 16:46

Yeah, I mean we I wouldn't say we we weren't cash flow, we were probably cash flow positive within the first two years. You have to remember this is probably back in 2006, 2007. Um, but from there, uh, you know, on average we've grown by a million bucks over the pay over year over year. And you know, we've grown the team by a lot more than that, probably about 14 uh grown the team by quite a bit. So um it it's it's you know, it it's in a great, we're in a great financial position now. And the nice thing is we just keep it just keeps snowballing to something bigger. And it uh once you get to a certain point, it kind of takes off more like a hockey stick rather than like just a normal uh normal trajectory, it just kind of keeps going, curving up faster and faster.

SPEAKER_04 17:42

Sam, would were there two or three big decisions that you you took that actually had the biggest impact on the trajectory, specifically when you're talking about the hockey stick trajectory? Were there two or three big decisions that helped?

SPEAKER_01 17:55

I'd say getting the right salespeople, um, getting uh we had uh our personal experience was we hired a salesperson that was more just in it for themselves, and they were a terrific, terrific salesperson. They could, you know, they could sell to anybody, um, but they weren't really a team player. And that kind of help kind of held back the operations department because they didn't like working with her. The rest of the sales team didn't like working with her. Um, so it was one of those things we had to let go of one of our best salespeople, but in the end, it ended up being the right way because I think we had our best sales year after we, you know, removed her. So I would say company culture and no one's bigger than the company is uh is a very important thing. Is it painful to get rid of your top producer? Yes, but you have to look at it for the long run. And I think that was the it was obviously the right call. Um, that was one I think anybody would speak to this right people, right seats. You know, sometimes you have uh a salesperson that is a great can't on, they might have a great PI for a sales position, but they're just not effective either on the phone or in front of people. And we found that maybe they're more suited for an FSM role, but I or just if they're not gonna be uh the right fit for the company overall, identifying that and just addressing that. And you know, um, I'd say the other thing that really helped us take off is just holding people accountable. And we use scorecards to that. Everyone has their top uh six metrics that they have to hit. And if they're going over them weekend or uh, you know, every month and people are constantly in the red, it's a very easy plane in front of you, like you are not hitting what we need you to hit. You can see this, right? And it's a very easy way to manage people, whereas people aren't blindsided when you say, you know, you're not really doing a good job, and they they have no idea why, because there's no reason for it. But when you use the scorecards, uh, that was a big thing. Uh, and I would I would highly recommend everyone start that immediately. Um, just making people accountable for what they say they're gonna do and just uh showing them every meeting that you have with them, where they stand, so it's very obvious where everyone is, so there no one's surprised and everybody's on the same page.

SPEAKER_04 20:13

When you're talking about these scorecards, are these the scorecard that corporate provided you or you built something on your own?

SPEAKER_01 20:20

Uh we developed our own, but I mean it was all based off of the one corporate provided. Um I think we probably have three for the salespeople, I think we have three of the six same metrics that they do on there. Um, we had, you know, calls, um, build um building surveys, um, dollars sold versus dollar proposed. So it was one of those things, especially with salespeople, it's a very easy way to say, you know, just because you sold, you know, $10,000 this month, you also didn't do the X, Y, and Z, and that's gonna show up next month when uh these goals aren't gonna, these are gonna be in red. And you can, it's you can see the track all year of how the whole year is gonna play out based on the how the scorecards look. It's it's really incredible.

SPEAKER_05 21:09

I think it's also I can ask more. That's fine.

SPEAKER_01 21:24

We're gonna know each other really well here.

SPEAKER_04 21:27

Um, so uh Sam, can you talk about the uh percentage of revenue is coming from different services? I'm assuming janitorial is going to be the biggest one, uh, but the margins and the services are going to be different. Can you talk about one is the percentage of revenue coming from each, and which are more margin-driven, and how do you manage that?

SPEAKER_01 21:47

Yeah, I'd say about 75% of our uh our revenue comes from the monthly janitorial service. So we do about 1.1 million a month in um janitorial revenue. And then we do about four percent in supply revenue. And then the remainder is other services and other services. I mean, you know, we've done everything. It's amazing. There is no limit to what you can and cannot do. We have one, we do a school system and we installed basketball hoops for ten thousand dollars. You know, we did a whole uh mold remediation. Uh, I mean, we run the gamut on just about anything. The core, the core services are usually floors, windows, supplies, carpets. Um, those are the core competencies. But then from there, you know, painting's a big one, pressure washing's another one. Um, you know, we've even done holiday lights. So it's just, it's it's really anything you can think of. Our our people are pretty much trained to say yes, and then we'll figure it out figure it out how to do it after we leave the building with the customer.

SPEAKER_02 22:54

Yeah, I'll ask a question. Um, so when it comes to quoting right prices, how do you find that right spot between you and the subcontractor so that you're both making uh the best of the deal?

SPEAKER_01 23:07

Um and it's one of those things you kind of have to get to know your contractors. You'll you'll uh initially you'll be kind of at the the mercy of them to kind of tell you how they price things, and you'll have to kind of gauge if they're giving you real pricing or if they're just, you know, you'll never win if you're if they're just going to give you the same pricing they'd give any other customer. Um, you kind of have to be able to feel that out, and sometimes we'll get two or three quotes from somebody, especially if it's a unique job. Uh, but you really have to um discern the way we always talk, you know, if if you were sitting in the customer's shoes and you got a quote for $20,000, would you do you think that would be an acceptable quote? And they say, I think that sounds high. And I say, okay, let's let's see what else is out there. So we'll talk to other contractors and we'll say, look, the the customer's budget's $15,000. Do you think you can still do the work? I'd say 90% of the time, the uh contractor will not want to lose the work. And uh they know they're gonna, if that as long as they do the work, they know they're gonna get paid. So they don't have to worry about chasing down the money. They know you're good for it. You know, um that's really how we sell ourselves and make sure that you know we're getting the right um right price points. And uh, once again, what you'll start to know the contractors to give you better price than others, and you'll just, you know, they'll start getting more work.

SPEAKER_02 24:27

So help me understand uh follow-up question there is you know, I love the phrase that you use there where they know that the money's good when they do business with you. I think it's a great position to be in, right, when you're hiring subcontractors. But how do you as uh as an owner here guarantee that the money's good?

SPEAKER_01 24:45

You know, uh I guess it's you have to we have a reputation that we're always good for our money. And I guess that's one thing you have to just make sure that you're you're firm with all your people that you know you are getting not just a company guarantee, you're getting my own personal guarantee that I am good for the money. Uh, I know you know you don't know me from Adam, but we're good people, we do what we say we're gonna do, and uh that's you know a promise. You do the work, I guarantee you're gonna get paid, and it's up to me to collect. That's one of the benefits you get from working with us, as opposed to going and waiting net 90 or net 120 to get paid from some of these other people. You know, every 30 days we'll pay you on the 10th. Uh, that's a guarantee. And it's one of those things, uh, especially when you start working with contractors, they'll start talking to some of their friends who are contractors or a friend's sister's a contractor. And it it'll just kind of snowball you'll you'll start getting in with the community, and word will get around that hey, you you helped Greg, you know, get his business up and going. He's got a lot more business than he ever used to. I want in on that too. I want the same thing you guys did for him. Well, here's our program, here's what, here's what we're all about. We're not trying to feed you to death like other people do. We're not trying to take advantage of you. We want happy customers, happy contractors, and at the end of the day, we'll all make money together. Thank you.

SPEAKER_05 26:06

Sure.

SPEAKER_03 26:10

Um, Sam, really quickly, like from a financing perspective, um, you mentioned you broke even uh uh like in like 24 months uh two-year mark. So what what um and you know you know you don't have to like go into super you know specific details, but I just wanted I was wondering what burn rate we should be looking at and we should be prepared for uh during those you know initial months.

SPEAKER_01 26:41

Um it's kind of all dependent on uh what you what you set up yourselves. Um I don't know if I could give you a uh a fair burn rate, you know. I'll just tell you that you know the business we had 20 years ago was a lot different than the business that it is now, even though maybe the the core of it's the same. Uh but I would just I would stress that getting getting the thing up to uh you know 40 or $50,000 a monthly recurring revenue as quickly as possible is really uh the name of the game. Taking on, you know, customers that uh, you know, the business kind of has, you know, restaurants and daycares and other things that may not be naturally appealing. Um taking on customers to help get that just that cash generation to keep it going so that there is a lower burn rate uh as far as cash, but making sure that you're getting the business and getting the recurrent revenue up as quickly as possible so that you can really start to work and develop the business and then get the clientele you want and really focus on you know more big picture stuff, but really focusing on just getting that initial. I'd say that once you get to the $50,000 mark, it's a whole lot. You've got a little bit of breathing to get then you can take it up to a you know a million or uh 83,000, which is you know our annual million million dollars. Uh, but getting it up to the $50,000 is is huge up front.

SPEAKER_03 28:12

Right. Sounds like very contextual, and like it depends on what strategy you kind of implement right out of the gate. Did you start with uh two sales executives, one sales executive? I think I might have missed that.

SPEAKER_01 28:28

We started off with one, and if I could recommend, I know not everyone's in the same financial position, I would recommend two people just because you don't want to be behirst of all, if you have two good salespeople and they both sell a lot, you'll get to your threshold a lot quicker. But B, if you hire one salesperson and they don't work out, you kind of don't know they're gonna not work out maybe the first 60, 90 days. And then if you gotta spend another 30 to 60 days training them and getting ramped up, you've lost half the year uh invested in the one bad salesperson. The the sales, you know, the sales cycle just gets a lot longer. When you have two people, they kind of naturally push one another. Um, you'll just see that it's a friendly competitive atmosphere. They're not, I mean, they're in separate territories within your territory, and they kind of push one another, they can bounce off things one another, and then it's also you know, some camaraderie in there. You know, we're both in this in the kind of same boat together. Let's see if we can help each other kind of get this thing cooking. Um it's just a lot, I think it's a lot easier if you have two people up front. But once again, I I can't speak for you on what your what your cash position is. Uh, you do have to spend, you know, twice as much on training, salaries, gas, you know, commission and all that stuff. Uh, I'll just tell you that, you know, after two or three years, probably wish you didn't hire three, but you know, that's that's not my call to make.

SPEAKER_03 29:58

Well, I you know, that makes that makes a lot of sense. Uh, is there a high churn rate with sales executives, or is there a high like turnover with you know these other roles?

SPEAKER_01 30:11

Um, no, we've gotten pretty good and on knowing what we look for, how we interview, the questions we ask, and we're very um very blunt with what we're asking and what we expect of people. And what we do with our, you know, if we're bringing on an FSM and account manager, we'll say, you know, part of the interview process is you've got to go drive around with one of our FSMs or DOOs for, you know, a couple hours in the morning because I want to make sure that A, I don't want you to take a job that you don't want to be here for. That's just as bad as hiring the wrong person. Um, but then you know, you've got they have an idea of what they're getting themselves in for, what the job is, and you do the same thing with the sales people. Sit them down, you know, with a sales executive or the director of sales. Sometimes we we have make phone calls. Uh, the people that jump on right on the phone and just get to it without even knowing what they're talking about, those are the ones you really want. Um, but just making sure that you have uh I think that's where we were lacking before is you know, you just want to hire somebody so you're kind of willing to accept less. But I'll tell you right now, in every market, the people the right person is out there, it's just a matter of finding them and just um giving them the structure, giving them the formula to follow. And if you have the right person, it's a no-brainer. If you have the wrong person, it's a whole lot of work.

SPEAKER_03 31:40

Super helpful. Thank you. Uh do you have like a structured or standardized commission structure or comp structure, or does it depend on like experience and uh um no?

SPEAKER_01 31:52

It it we don't really take experience into it. The I would my personal our personal feeling here is we don't like people that come from the cleaning or the you know maintenance industry. They usually have bad habits or they know more than anybody else here, and then they usually sell their own thing, and then they've got just things, things you can't work with. If you have the right person and they don't know what they're doing or know what they're selling, we can always teach that, but you can't teach somebody who wants to get on the phone, somebody who wants to hear those 100 no's before they get that one yes, somebody who's very hungry to go and move on to the next customer and can't wait to get off this phone call so they can start making more because they see at the end of the day the more phone calls I make, the more money I'm gonna make. Uh, finding that person is a lot more um important. But yeah, we have a we have a pretty standard uh our commission structures, you know. Uh we're trying to encourage people to sell accounts between two and twelve thousand dollars a month. We have C-Like accounts bigger than that, uh, but we reward them at a higher uh level because that two to ten, twelve thousand dollar, we know we're gonna get the supplies, we know we're gonna get all this extra work. The accounts over twelve thousand dollars, they usually um they usually go out to bid or it's it's a little bit more um long long term. We obviously take larger customers, that's not a problem. But the two to two to twelve thousand dollars, that's kind of our sweet spot. And so we we pay the um sales executives, you know, 75% of the contract over six months on that. Um, and then the uh account managers, we have a uh gate system, you know, uh once they hit a certain threshold, $200,000 uh from zero to $200,000, they get 5%. Anything over $201,000 for the year, they get paid an uh 7% of everything they sell. So it's for the whole course of the year. So, you know, we've got uh one of our FSMs is gonna sell $1.2 million in extra charges this year. So she's at the the last gate. And we did a we're gonna send her to Mexico. We're going to um do a whole bunch of stuff that we're able to do because she sold, you know, $1.2 million worth of extra stuff for us. And she did that while keeping customers on the book. She's got a great customer retention rate. Her customers love her, so they buy everything they can from her, and she just she never stops going.

SPEAKER_04 34:24

Sam, can you talk about a little bit about your typical gross margins and the net margins?

SPEAKER_01 34:30

Uh we are JS, we uh typically our margins 35%. So we're you know, we're paying out typically 65% of that to the contractor. Um with supplies, we've just uh you know reviewed our pricing and everything with what's going on there. So uh we're probably gonna make about close to 30-35 percent on supplies, and then extra charges are about 35 to 40 percent. We're gonna we're trying to make it a point to really um get closer to the 40 percent uh margin on extra charges. And we're doing that because we have um our uh IC recruiter team is really just getting aggressive with you know people who want the work, you know, if they can give us, you know, two or three points here, two or three points there, you know, we could end up making up a lot more for the course of the year and get them a lot more business.

SPEAKER_04 35:27

So these numbers would be very much like the the gross margins that you keep apart from the contractors. Um what what would be the ballpark for the net margins? Like after paying the salaries of the employees and stuff like that?

SPEAKER_01 35:41

Oh what you know, what what's left to you know what's left to pay you? Yeah, okay. Uh yeah, you we're probably at about uh seven percent, eight percent, something like that.

SPEAKER_04 36:06

Um like um how seasonal is the cash flow and how do you handle slow months financially?

SPEAKER_01 36:14

Um the what I'd say is I wouldn't really say there should be slow months. I mean, we don't see that. I it's not really a cyclical business like that. I don't know if that's what you're asking, but I mean that there's plenty of stuff to do all year round. The the good thing about um the janitorial is it doesn't it's not like snow plowing or landscaping where you know that very much is seasonal, but there's not necessarily a painting season, even during the holidays, uh, is when uh like this time of year, people have budgets that they, you know, if they've got fifty thousand dollars and they've spent you know forty-five thousand dollars, they don't want to not get that extra $5,000 for next year. So they've got to find ways to spend it with the offices or buildings less occupied now. We find they're more, you know, can we get this job done in the next two or three weeks so that we can just you know get this done? I want this, this, and this. And then they can get other projects done. Um, but it doesn't slow down in the new year. That's when a lot of money opens back up. Summertime's, you know, a great time to uh focus on other services. So I I wouldn't say that there's it's not really a uh a model that that is prone to ups and downs. It's not, it's I wouldn't I don't see any seasonality to it.

SPEAKER_04 37:30

Would you call us that this is a uh like is this a capital intensive business? And how much working capital do you think a new franchisee would need realistically?

SPEAKER_01 37:42

Um that's different for everybody. I would tell you if I was starting one today, I'd you know uh if I was gonna do it, I I'd say probably anywhere from a hundred about a hundred and fifty thousand dollars, maybe. Uh I think I think that would cover just about everything up front.

SPEAKER_00 38:15

Sam, about twenty years in, you obviously have extremely significant growth, even with the amount of time that you guys have been in the system. I know we've touched on a lot of different parts of the business that have continued your growth, but is there anything else that you can kind of pinpoint as to why 20 years in are y'all still having this amount of types, this amount of growth year over year?

SPEAKER_01 38:41

I think it's it's a really cool thing. You know, when when we started it 20 years ago, it was pretty much, you know, sell cleaning and you know, maybe get some floors done and stuff like that. And then, you know, as other citywides have come on, you see really the potential of what can be done, what you know, what growth really is out there. Um, you know, uh some people have entire teams that are focusing on project work. There is just a ton of potential. And the more we talk to customers, they really do want one person to just call and take care of a lot of this stuff, do project management for them. Um, especially the larger customers really want that. And then most of the people who are in charge of the cleaning or are in charge of, you know, getting the exterior of the building done or whatever it might be, it's not really their core focus. So, really, it's a huge time suck for them to where they don't want to spend time talking about the cleaning because nobody's writing an email saying you guys did a great job with the toilets last night, the floors look great. Um it's usually just a big waste of people's time. So if you can take that off their plate and sell them that, uh, you'll just they'll naturally just come with you. Hey, you know, I need this conference room painted, I need carpet replaced here. Uh, you know, we're having a big visit come in. Do you guys have anyone that can, you know, do the windows here? It's it's just it just snowballs. And if seeing what's out there and seeing what other cities have done, the potential is just enormous, regardless of the size of the the market or whatever. I mean, it's it's just incredible the opportunity that's out there.

SPEAKER_00 40:16

Yeah, absolutely. Thank you. I I hear a lot of it being, you know, the the management of your relationship and that growth with those clients. So I'm glad to hear that and uh appreciate you sharing.

SPEAKER_03 40:28

Sure. Sam, uh sorry. Uh so can you talk to us a little bit about your territory? Are there what the territories that border you? Are there territories that border you? How do you work with um and then also can you talk to us a little bit about national accounts? Like what is the rev? Like, what is the revenue and obligation split between you know um yeah?

SPEAKER_01 40:59

Um to so we're in Cleveland, we have the Cleveland Akron market, and then the territories that kind of um go against us are Columbus, which is Chris, and then there's David over in pretty much northwest Ohio. We'll just call that Toledo. Um, and our relationship is incredible. Uh, you know, we've got protected territory, so nobody is going after one another. Uh, and there's very much a rising tide lifts all boats thing. So just uh last week, no, two weeks ago, uh three people of our sales team went down to go see um Columbus and go learn on what they're doing and really see, you know, where they're where they're really strong and uh getting key takeaways. And they're happy to host us. You know, uh it's a very much a camaraderie uh thing. And the same thing with David, you know, sometimes we'll have um problems that overlap, you know, we'll call one another and see, you know, here here's what I've got going on here. How'd you deal with this? Or you know, what would you recommend? I I don't know how to quite handle this. And uh I think if you called any one of the not just the neighboring ones, you call any of the other citywides, and if if they're available, they'll they'll help you. Um the only problem is sometimes there's not enough hours in the day, but uh there's very much a team atmosphere, and everybody is looking to um help each other grow because everyone's been in that spot, especially starting out. Everyone started off at you know, zero dollars, and you know, how do we grow this thing to something? Uh, and so everyone does want to see other people um succeed, and people are always available to to help. And I'd count myself among them uh amongst them, you know, happy, happy to help uh because been there, I wouldn't say it's easy, but uh do it all over again.

SPEAKER_03 42:54

Aren't these all million plus territories? Uh they're the minimum number.

SPEAKER_00 43:03

Uh are you talking about the ones that are surrounding Sam?

SPEAKER_03 43:08

Yeah, yeah, and and SAMs as well.

SPEAKER_00 43:11

Yep, they're all about the same exact size, um, especially especially in the Ohio area, but um specifically there, yes, as well.

SPEAKER_04 43:22

Um Sam, what skills do you think are critical to succeed in this franchise? You you talk to a lot of other franchises, franchisees. Um, when you look at the top ones and the average ones, what skills do you think these are the people who are doing really good? What differentiates them?

SPEAKER_01 43:44

I would say just being able to recognize and reward top talent, uh just making sure you know this this business isn't possible to do by yourself. And I would recommend you just always look to surround yourself with the best people you can. And making sure that those people are rewarded. And there's a path forward for them. Like I said, it's impossible to do this business by yourself. You're always wanting to hire people that can do something better than you if that's possible. And just I'd say that the top cities always have some incredible people working for them. They themselves are incredible, but they they attract attract the top talent and then they coach them and work with them to make sure that they are all on the same page and continue to work with them. Creating the team atmosphere is is huge. And uh I think that's I I would rec if if you're gonna do go through core values, I don't know if anyone does traction, but um teamwork is is paramount here.

SPEAKER_04 44:57

And how hard it is to find and retain good people uh in your territory. Especially I'm talking about the people who are difficult to find, like either salespeople or uh even the contractors.

SPEAKER_01 45:10

Yeah, and you know, if if you do things right and you hold them accountable, you'll find out a lot quicker than not if they're the right people. But uh, like I said, just being uh very open and honest with what the expectations are, what you expect of them, holding them accountable, um, and just making sure that they're in it to win it too, just like you are.

SPEAKER_05 45:40

All right, y'all, we have a few minutes left.

SPEAKER_00 45:42

Taryn, go ahead and ask your questions. I know you've got some if you want.

SPEAKER_04 45:49

Okay. Um, so um, you're talking about like uh you're you're you're generating most of your leads on your own. What are the typical sources? What are the what are the most common channels through which you are getting the leads? Is it always the cold calls?

SPEAKER_01 46:07

Uh the cold calls are nice because it's setting them up for when you do call them up on the phone. Um, we get some lead generation, you know, uh through marketing and through email blasts, stuff like that. I I think you're it's really right now it's really tough to replace the effectiveness of the phone. Uh some salespeople like to say that they're really good in person. They like to just uh go out and meet people on the road, and that's that's how they're most effective. Uh while I don't disagree that you know, if you can meet with the people uh in person, you can cover a lot more ground on the phone than you can uh you know in person. And then when you're on the phone, there's also a uh personal connection and personal compatibility. People are getting blasted with emails, you know, you you've probably gotten 100 a day. Do people look at them sometimes, sometimes they don't, but if you get a call, and especially if you're in the market for looking for to replace your current service, they called you at the right time. Uh it's tough, it's tough to look at that through you know the lens of you know, some guys here wants to give you a quote, you know, he's in the lobby. Can you meet with him? No, they don't want they don't want to be um uh strong armed like that. But uh it is nice, especially when you do drops, you drop off information. Sometimes you drop off a coffee mug, a notepad, a five-dollar gift card or something like that, something to get them to call you back. I wouldn't recommend you do that for you know 500 people, but uh if you identified your top people, it'll they'll pick up your phone call when you call them back in a day or two, and uh it's it's really effective if you're if you're doing it right.

SPEAKER_04 47:51

Like how is your would you call your territory is competitive? And if yes, how do you differentiate from other so many others? You started by saying the bar is so low. What you're saying, it's going to work, but tell me a little bit more about competition and how do you differentiate?

SPEAKER_01 48:09

Yeah, I mean, there's a ton of competition here. I mean, there's pretty much any uh franchise model, you know, Janakin cover all Anego System 4. I mean, they're all here. We've got a ton of mom and pops. There's a large amount of um operational companies, you know, you got the ABMs, there's some smaller ones. So uh we're not short of competition, and our competition is calling our not only our prospects, you know, three to five times a week, they're also calling our customers three to five times a week. So uh it's a very competitive um uh business out there. Uh how I'd say we differentiate ourselves, we really do try to get to the core when we're on the sales call or the building survey, we're really trying to get to the core problem of it. You know, how many, how many times have you taken us out to bid? You know, five times in five years. Okay, well, instead of us being the sixth one in six years, what is let's see what's going on here. Why are why do you have to keep taking this out to bid? Why do people keep failing? What's going on here? What is the root cause? And I think a lot of uh other companies are just so happy to get the sale. You know, they'll just tell them, yeah, we'll fix it, we'll fix it, we'll do this, we'll do this, but they never get to the what the real root causes of, and it could be a hundred things. Maybe they don't have enough money, maybe they're maybe they're paying $500 too low. Um, maybe they need to know that, and they just they're always their inclination is always to go for the lowest bid or whatever it might be. But sometimes it's a management issue. Sometimes they just need to, you know, what what is going on here? What is the root cause? And I think it's a really a fresh look at things when the prospects are saying, you know, we've I've got three or four other bids. You're the only one who told me X, Y, and Z. And a lot of times we'll tell them we don't think we can do it for this price, or we think that this is a uh antiquated solution, or you guys need a scrubber here, you guys need whatever it might be. Um, we're very honest, we're not trying to just take people's money and run because it does us no good to just have a customer for six, seven months and then get a cancellation letter. It's by the time you pay the salespeople and waste all your time and take all the nasty phone calls and emails, you haven't really made anything because then they're not buying other services because they're unhappy with your your clean, so they don't want to buy anything else from you. So it really doesn't set up the operations team to succeed, and you're not gonna get where you need to be.

SPEAKER_04 50:35

So what are the obvious life of a customer?

SPEAKER_01 50:39

I mean, we've we've got a couple customers that have been here for almost 20 years. Um that that's that's the exception, I'll grant you. Um I couldn't speak to what it is I'd have to look. Um but we I'll tell you, we're I think we're we're over 90% of retention this year. Uh that that was uh that was a big push. Um immediately after the pandemic, we we had a little bit of a dip there, and that was just kind of onboarding all the people for growth, and we kind of got away from the uh basics of you know how to uh walk a building, how to have a positive and effective uh customer visit. Um but I'd say, you know, we keep most customers for years. And the RDO is just so much more powerful, you know, that first year is one thing, but that uh RDO for years two and three is just it's it's so impactful.

SPEAKER_04 51:35

Any last advice you would have somebody starting out brand new in this one? Anything that you haven't covered, and by the way, thank you so much. I again this was extreme.

SPEAKER_01 51:45

Um I would just try to say, you know, keep keep a long-term view of the whole thing. Um, it's kind of hard when you're in the day-to-day and you're on the pain train and you know, you're you're up front, you are you are bleeding cash and you know, you don't want to maybe spend something. Uh, but if you do have a good uh good customer, or uh I would highly recommend you do everything you can to make make sure you have good strong customer relationships and not skimp on if you know you got two salespeople you're interviewing and uh you like them both and they're both great. I would recommend you try to hire both, try to find a way to hire both, um, as opposed to just pick the pick one and pick the wrong one. You got a 50-50 shot. Um, you know, in a few years, you're not gonna care. Up front, you do. And I I get that. So uh once again, that's up to you. But I I just know from experience, um I wouldn't follow my mistakes in the past. I would say learn from them and say, in two years, when you're you know in a lot better position, you're gonna be thankful that you did that.

SPEAKER_05 52:58

Thanks, Al. Sure.

SPEAKER_00 53:02

Awesome. That was great, Sam. I really appreciate you giving us such thoughtful answers. This was incredible. You guys asked great questions. We we had a great call today. So thank y'all for all being here and being present. And thank you, Sam, for hosting and giving us your time.

SPEAKER_01 53:21

Sure, no problem. Glad to do it and uh look forward to seeing all you guys again.

SPEAKER_00 53:26

Thank you, Sam. That was great. Thanks all for attending. It's great seeing everybody. Take care.

SPEAKER_05 53:32

Bye-bye. Bye, guys, have a good day.